Bennett (Electrical) Services Ltd v Inviron Ltd

The sub-sub-contractor's acceptance of the sub-contractor's letter of intent did not bring into existence a contract on the basis that the true construction of the letter was that the parties had agreed a request and restitutionary basis of remuneration

12 January, 2007

BENNETT (ELECTRICAL) SERVICES LTD v INVIRON LTD

Technology and Construction Court
His Honour Judge David Wilcox
12 January 2007

The adjudicator awarded the sub-sub-contractor a specified sum in respect of the work carried out by it under the sub-contractor's letter of intent. The sub-sub-contractor applied to the court to enforce the decision. The sub-contractor resisted enforcement on the ground that the arrangement entered into as a result of the sub-sub-contractor's acceptance of the letter of intent did not in any event satisfy the requirements of section 107 of the Construction Act for any construction contract to be in writing.

Judge Wilcox agreed that any contract that had come into existence as a result of the sub-sub-contractor's acceptance of the sub-contractor's letter of intent did not satisfy section 107. This was on the basis that essential and key matters that would have been express and material terms of any concluded sub-sub-contract were not specifically recorded in the letter of intent and that the agreement was subject to additional oral terms and variations. In particular: (1) a great deal of extra work was instructed by the sub-contractor under the letter of intent (2) the sub-sub-contractor's contractual claim before the adjudicator for additional monies was not defined by any written contract terms (3) The default provisions of the letter in the event of a formal contract not being concluded of the sub-sub-contractor being reimbursed its reasonable and substantiated direct costs of complying with the instruction in the letter made no provision for price and rates, the method of assessing and timing the payment of such costs (4) Whilst the gaps identified in (c) above and, in particular, as to any payment structure might have been filled by the parties as the work progressed, such terms were not recorded in writing as required by section 107 and (5) A number of key matters were discussed at the meeting referred to in the letter (as one of the list of items forming the basis of the proposed contract) that were not specifically recorded in the letter or incorporated by reference in a manner satisfying the requirements of section 107, including working hours, mechanisms of payment, variations, insurance and health and safety.